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Monday, November 22, 2010

Mega-cities such as Chicago will confront major challenges in the Post Peak Oil era. The core problem facing our largest and most densely populated cities will be economic: we will have to meet rapidly increasing costs in day-to-day operation of our critical systems for transportation, water treatment, emergency response, sewage and waste treatment and disposal, law enforcement, and the maintenance of critical infrastructure necessary to deliver these services, in a climate of rapid and geometric increases in costs due to the draw-down of liquid fuels, production of which is projected to drop 5% a year or more from 2012 forward.

Is it wise to divert future tax revenues to subsidies for private purposes, no matter what their merits may be, when Chicago currently is struggling financially and is unprepared for the post-Peak Oil era? At this time, the city's systems and infrastructure are in need of substantial repair and upgrading, and any further diversion, present or future, of public money to private purposes could further impair our ability to maintain a safe, orderly civil environment.

TIF and RIF financing mean the diversion of future tax increases (the "increment") from general revenues to private purposes, in this case the rehabilitation and winterization of rental properties in the 49th Ward. The amount of money involved is often substantial; in the case of the proposed 49th Ward RIF, up to $54 M will be diverted from general revenues in an era of steeply increased costs of operating the city in an era of steep reduction in available energy and vastly increased operating costs.

Additionally, other wards will also demand RIFs for similar purposes, which means that the amount of future property tax revenues diverted could be multiplied by 50, since many of the the south side and west side wards are burdened with much more rental housing stock in much worse physical condition than that of the 49th Ward. This could mean that, ultimately, up to $2.5 Billion could be diverted from general revenues to the purpose of rehabilitating rental properties, over the next 25 years,in addition to other subsidies for other private purposes, to the detriment of the City's ability to fund daily operations and make necessary investment in the upgrading and expansion of critical infrastructure to keep the city minimally safe and sanitary in an era of crippling shortages and rapidly escalating cost s for nearly all services and goods.

Given that Chicago's water and sewer infrastructure is decrepit and outdated, and will need substantial repair and upgrading to continue to meet current needs, and that its public transportation system is also in poor condition and ill-equipped to handle a steep and rapid increase in ridership that could occur if the cost of auto ownership were to become too expensive for low and medium income residents due to rapid escalation in fuel costs. Considering all of the foregoing, Chicago and the surrounding Cook County suburbs are currently ill prepared for the vicissitudes of Peak Oil and the terminal decline in oil and other fossil fuel production.

While the costs of running our city in such a manner as to ensure basic safety and sanitation will rise steeply and rapidly, tax revenues could well be in free fall due to declining incomes of residents and in business activity, as declines in fuel supplies will raise the costs of all business activities in proportion. Many businesses will fail and nearly all will face major challenges, while employment opportunities will wither. Property taxes, sales taxes, and all other taxes and fees will most likely have to be increased steeply to meet daily operational expenses and perform "patch" repairs in critical transportation, water, and sewer infrastructure, and expansion and improvement of these systems will quickly become prohibitive.The capital necessary for expansion simply will not be there because of the debt overhang from the early 2000s that has absorbed all the capital that otherwise might be available to invest in replacing aged infrastructure and expanding our utilities and public transportation. Yet this investment will be necessary if the city is to maintain services at their current level for the current population of approximately 2.9 million and surrounding suburbs that rely upon our water treatment and sewer systems. Additionally, massive investment in the regional public transportation system will be necessary for the system to accommodate new riders as driving becomes prohibitively expensive for tens of thousands more local residents than currently use the system.

Chicago will therefore have to find a way to finance vastly more expensive daily operations and maintain and expand as needed the utility and transportation infrastructure needed to ensure that the city will remain safe and livable with steeply reduced energy imputs from that point forward. There is at this time no substitute for oil and other fossil fuels that will meet all energy needs,, and plans for alternative energy, such as expanded nuclear capacity, will take at least a decade and most likely two decades to be fully implemented. Expansion of our power generating capacity will also be problematic because of the shortage of capital.

In short, the city will have great difficulty in funding its daily operations and in finding the capital to invest in necessary infrastructure repairs and upgrades, with the revenues that will be available for the purpose. It will most likely be necessary to raise taxes substantially just to maintain services at their current levels and make emergency repairs on critical infrastructure. Investment in expansion and upgrades of that infrastructure to meet the needs of an expanding population of ex-suburbanites and immigrants from other cities and towns, in an economy that is shrinking in response to steeply higher fuel costs, will require massive capital outlays that will be possible only if tax revenues increase steeply.

Any further diversion of tax revenues from public purposes to private purposes, by means of a TIF, RIF, tax abatement, or any other direct or indirect public subsidy, will mean that less money is available to prepare the City of Chicago's systems and infrastructure, which are already somewhat underfunded and have critical deficiencies, and that the city could end up in a financial bind impossible to negotiate as costs increase 25% or more and it becomes impossible to operate on the revenues available. This could mean steep reduction of necessary services, such as sanitation, emergency response, and law enforcement; and cascading failures in critical systems such as water and sewage treatment, and transportation infrastructure, greatly endangering the health and lives of 2.9 million (and possibly many more) city residents; and rendering the city much less attractive as a place to do business.

Our most important task in preparing for the post-peak era is rendering our community more resilient and self-reliant in a context where government subsidies and services may be steeply reduced, or non-existent. In the future that is almost upon us, our governments will be increasingly unable to function as they have for the past century, and will be unable to provide funding and assistance for any but the basic functions of a local government, and surely will not have the means to provide subsidies to individuals for private purposes, no matter how worthy.

For these reasons, any further diversions of tax revenues, present or future, for private purposes, would mean putting our basic services at risk and would endanger the health and lives of Chicago's 2.9 Million residents, and possibly many more in Cook County that are dependent upon the same systems for essential services. As it is, large diversions of revenues from the public till to private purposes have crippled Chicago financially, and retarded the city's progress in upgrading its critical infrastructure and funding daily operations.Therefore, the proposed 49th Ward RIF, should be tabled, and no future TIF or RIF financing should be considered.

Additionally, extant TIFs and other subsidies to business entities should be reviewed and re-considered in light of their true benefits, if any, and the negative offsets to those benefits, with the aim of reducing as much as possible the drain on public finances, and building reserves for the expenditures we will need to make to keep our city and its environs livable and economically viable.

Wednesday, November 17, 2010

Those who believe that TIF or RIF funds are "free" money need to take a look at what is happening to taxpayers in extant TIF districts in Chicago.

Uptown Update's November 15 post displays a tax bill for a property in the Wilson Yard TIF District. As you can see, fully 71% of the amount goes to the TIF district, and away from the schools, the police department, the fire protection district, the libraries, the parks, and all the other critical services and public amenities that make Chicago a good place to live, work, and do business.

No wonder Chicago is having serious financial problems. We have over 160 extant TIF districts, with more being planned, notably the 49th Ward RIF that will cover the entire ward. Additionally, some TIFs are renewed when their 23-year term expires.

Was the Target store on Broadway worth diverting so much money from the municipal services that we need to have a safe and sanitary environment? Do the 200 or so jobs the store supplies offset the reductions in services and hikes in taxes and fees made necessary by the loss of tax revenues?

Remember, every dime allocated to a TIF comes out of city revenues. There's no such a thing as free money.

Tuesday, November 16, 2010

Follow the link to the fact sheet for the proposed 49th Ward Rental Improvement Fund, the TIF that will cover the entire 49th Ward, and divert up to $54 Million in property taxes paid in the ward to landlords in the area to rehabilitate their properties, on the condition that they reserve a percentage of their units for low-income tenants.

Many people believe that this plan is an "improved" TIF, but the closer I look at this plan, the more difficult I find it to believe that it will benefit anyone other than owners of rental properties who are to receive the grants.

The RIF (Rental Improvement Fund), a variation on a traditional TIF created to improve rental property, is being promoted by Marilyn Pagan-Banks of North Side P.O.W.E.R. and 49th Ward candidate for Alderman, Brian White. The RIF is projected to generate up to $54 Million over its 23-year lifespan, which is to assist (i.e. subsidize) more than 1,500 rental property owners in the ward in repairing and rehabilitating their properties on the condition that they keep their rentals affordable.

According to the promoters, we need the RIF to "improve the quality of life for all Rogers Park residents by preserving the unique diversity of Rogers Park as a community of choice", to "address the current situation- that much of the housing stock in Rogers Park is aged and could be improved with rehabilitation-while creating a future source of dedicated revenue for continued housing market stabilization and improvement"; and "Protect many of the smaller landlords who may be compelled to exist the rental market or raise rents to unaffordable levels, due to the costs to make repairs."

The RIF will exist "solely to fund multifamily rental property repair and rehabilitation", and funding would be available to landlords in the form of grants, in return for which the landlord would agree to keep rents affordable, as defined in the guidelines, for ten years.

Taxpayers should have a lot of questions to ask about a plan that will take an "increment" of local property taxes amounting to as much as $54 Million over the next 23 years to subsidize some property owners to improve their properties while maintain rents at reduced levels. For starters, the grants will be offset by additional property taxes to make up for taxes being diverted away from essential city services, which means that the rents in the area will trend higher and there will be no net gain for the renters on properties that benefit from these grants.

And does Rogers Park really need more cheap housing, in an era of falling house and condo prices, and downward pressure on rentals as failed condo conversions revert to rental?

Will this TIF overlap some of the areas covered by the Loyola-Devon TIF, which still has several years to run? What effect will being in two TIF districts have on the taxes for affected properties? Will it matter?

But the most important questions are these: What gives a public agency the right to to divert public money to private property owners, whether for the benefit of renters or anyone else? And how is "continuing housing stabilization" the function of a government?

Will the RIF do more to aggravate blight than mitigate it?

Worse, could it be that the RIF will make lower-income renters worse off, not better, and that they will end up paying more rent, not less? Will the RIF be just another factor in driving up property taxes, and rents, thus not only canceling the benefits to landlords and tenants, while increasing the load on all property owners?

Most of all, how will Chicago solve its financial problems and continue to provide essential civil services such as police and fire protection, public transportation, schools, as well as desirable amenities that make the city an attractive place to live and work, and still keep taxes at levels where Chicago can compete with other cities for businesses and residents, if we continue to divert hundreds of millions of dollars in the aggregate of all the city's 160-plus TIF districts, not to mention a multitude of other massive subsidies named differently, from city coffers to private purposes?

None of our candidates for the alderman in the 49th have addressed the city's mounting financial problems, which mirror those of the state of Illinois, now one of the most financially challenged states in the country. Much less do they seem concerned with how we will be able to fund essential services, and critical infrastructure repairs and improvements in the coming era of rising fuel prices and increasing shortages, and falling tax revenues due to the continued shrinkage of our tax base and the deteriorating incomes of the population.

Two public meetings concerning the RIF have been held so far, with only a day's notice given for each, resulting in low attendance for each. The first I attended, at which Tom Tresser spoke, had only a sprinkling of attendees. It would be beneficial and only appropriate to have another meeting for the public with more publicity and advance notice, and attended by our candidates for Alderman, Joe Moore and Brian White, especially since the latter is one of its promoters; as well as Marilyn Pagan-Banks, and the members of the ZULAC zoning committee. The public is entitled to a more solidly grounded justification for yet another massive diversion of public money for private purposes.

Sunday, November 14, 2010

The Chicago 2011 election looks to be a dull election, a study in foregone conclusions.

The lineup for next year's municipal elections, with a few interesting exceptions here and there, is comprised of Legacy politicians whose major accomplishments are tax increases, budget crises, and massive subsidies for crony businesses, along with reduced services and increased fees for nearly everything. Only in a few wards, such as the 46th and 48th, do Chicago voters have a choice of interesting, talented newcomers who might be capable of reversing the insanely destructive policies and initiatives promulgated by our outgoing Mayor and the 50 spineless, brainless rubber stamps who have never opposed Daley on any important issue and who've played the major part in making Chicago an expensive and altogether unattractive city in which to locate a major business without being offered a massive taxpayer-funded subsidy... and making life miserably expensive for taxpaying residents and businesses while reducing essential services.

Maybe we are all so occupied with the struggle to get or hold onto a job and make ends meet in this dismal time that we have little energy to spare for the 2011 Chicago games, but a curious inertia seems to have settled over the city, for this election seems to be generating very little interest among the population. That is really astonishing given the incredible mismanagement of the city's finances and assets by our current lineup of clowns, and considering that this is the first time in 20 years we've had a real opportunity to elect someone other than Daley as Mayor, whose grip on power was considered so unshakable that he never once during his 20-year reign had a truly serious challenger. Same thing in several of the wards, where entrenched incumbents are stepping down after decades of running virtually unopposed, such as the 46th Ward (Uptown) and 48th Ward (Edgewater), where Helen Schiller and Mary Ann Smith are both retiring, creating opportunities for political newcomers..

There are at least 7 candidates running in the 46th, all of whom are interesting, and a number of whom have extremely detailed and specific ideas to address the ward's major issues. I will decline to comment further on the 46th Ward race as I am employed by one of the candidates, and wish to avoid a conflict of interest.

In the 48th Ward, the bland legacy pol, Harry Osterman, a long-time representative to the State House, is opposed by newcomer Phil Bernstein, who is best known for his trenchant blog, Edgewater Intelligencer, and is a feisty and original independent with over three decades of experience as a business owner and public servant who has directed major public works projects, and who offers a detailed vision for Edgwater, including specific plans for reviving Edgewater's moribund Broadway and Granville retail strips and most of all, solving Chicago's increasingly serious financial problems. His opponant Osterman is a nice enough guy in his colorless way, I suppose, but there's more to being an effective leader than being a "nice guy" and Osterman has, after all, been a part of the state government that has made Illinois one or the most financially troubled states in the union. Bernstein, by contrast, not only has very detailed plans for the ward and the city that include viable ideas for reducing expenses and balancing Chicago's out-of-control budget, but has taken real risk in publicizing his positions, his vision, and his plans in great detail at his candidate's website, which most candidates avoid doing, preferring to mouth the usual vague palaver about "creating jobs" and "improving service" and "creating coalitions". It's easy to come through on promises that are nothing but vague, general statements that promise nothing in particular. You aren't expected to deliver what you never promised, but when you say that you absolutely will, say, donate 30% of your salary to local charities, reduce property taxes, and mitigate the city's budgetary problems, you had better deliver. Bernstein pledges to do all of this, and we can only hope that 48th Ward residents are sufficiently motivated by the recent spate of violent crime, the deteriorated condition of Edgewater's retail districts, and escalating taxes, to put their Iphones aside for a few minutes this February, and go out in the cold to vote to give this talented and spirited outsider a chance.

Here in the 49th, Joe Moore, the 20-year incumbent, has no credible opposition at all. It was not until a couple of weeks ago that I encountered anyone circulating petitions for any candidate at all, though I heard loose talk about a number of others, including Blane Roberts, Joyce Shanahan, Louis Herrera-Baker, Ben Meyer, and Brian White. I signed Brian White's petition, holding my nose, just so there would be somebody on the ballot besides the incumbent. I have not encountered anyone circulating petitions for anyone else since, even though I walk the streets a lot, and use public transportation.

Somehow, none of these people seem like they're likely to offer spirited opposition. Sorry, kids, but your Facebook page doesn't make it as a campaign site, and neither does a one or two page amateur website with a couple of pictures of you and your charming family, but only vague statements about "service" and no specifics about your experience or qualifications, and most of all no vision or specific, detailed plans as to how you will implement your plans.

Well, Shanahan, and recently, Herrera-Baker have dropped out of the race, and Shane Roberts and Ben Meyer are invisible, so Joe Moore's only real opponent at this point is Brian White of the Lakeside CDC. White sole agenda seems to be securing a TIF to cover the entire 49th Ward, designed to subsidize landlords to reserve apartments for low-income renters, and is patently a device for conveying property taxes to certain Rogers Park landlords. Does Rogers Park need more low-income rental housing? Does diverting our tax revenues from essential services and desirable public amenities to favored apartment owners for the purpose of securing housing for low-income tenants, benefit most of the ward's middle-class population? Since White and Moore are both supporting this TIF, and seem to have similar agendas altogether, White's candidacy seems rather pointless.

If anyone is opposing O'Connor in the 40th (Edgwater-Rogers Park-West Rogers Park, or Bernie Stone in the 50th (West Rogers Park), I haven't heard about it. If you've heard anything interesting, fill me in. These two wards are experiencing problems with spreading blight and crime, and their somnolent incumbents need to be replaced with energetic people who have visions for their wards as vibrant urban neighborhoods with well-maintained rental housing, clean streets, and lively, well-kept retail districts.

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